Key developments and challenges

The socio-political crises of April and June 2010 have seriously dented growth prospects and significantly increased fiscal expenditure needs. Donors have pledged fiscal support until 2012, but in the medium term, fiscal discipline needs to be restored to ensure public debt sustainability.

The crises have also highlighted the need to tackle deep-rooted corruption and nepotism. The new constitution that envisages the introduction of a parliamentary system of governance could help to address these issues, but it is also important to adhere to the rule of law and establish an impartial judiciary.

The overall credibility of the public administration and regulatory bodies, especially that of the banking sector regulator which was severely eroded under the previous regime, needs to be restored so that the private sector can undertake meaningful policy dialogue to improve the investment climate.